Will Wells Fargo make a comeback?

By David Russell,

Shutterstock photo

Wells Fargo dropped last week, but one investor apparently thinks that it will rebound.

optionMONSTER's monitoring programs detected the sale of 17.341 November 35 puts for $1.68. An equal number of October 35 puts were bought at the same time for $1.20, but volume was below open interest. This suggests that an existing short position was closed in the front month and rolled forward in time.

The trader probably sold the Octobers before last week's earnings report, looking for strong results. But the shares fell after revenue missed expectations, and now he or she is now on the hook to purchase shares if they stay below $35. So trader bought them back and sold the Novembers, garnering an additional $0.48 of income while staying in the trade for another month.

Given that puts have a negative delta , they stand to benefit from WFC pushing higher over the next five weeks and are essentially long the stock. (See our Education section)

WFC is down 1.64 percent to $33.69 this afternoon. Despite dropping Friday after releasing earnings results, it's still up 22 percent so far this year.

The put roll was the largest trade in any company so far in the session. The activity pushed total option volume in the name to almost twice its daily average.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: WFC

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